Breakingviews: Valeant attempt

May 21 - Richard Beales and Robert Cyran preview the Canadian pharma company's improved offer for Allergan, due next week, and discuss the weaknesses in its acquisitive business model.

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Valeant pharmaceuticals trying to -- -- again huge deal hostile deal. The Canadian M they machine which is Valeant has said that -- get a give us next week higher -- didn't what is this going we we we got a couple of problems right the visible analysts -- on the and you don't think that's sustainable. What they do is -- -- has a history of going out and buying up of the companies and and basically cutting costs the -- and then. You know profit suddenly surge played in the band but to do that -- to keep the one that takes exactly because you're cutting out that. Recess that might bring you revenue -- have a problem of course drug companies as they need to replace things over time. Right wing guy tries to buy companies that don't aren't as quite as exposed to patent losses as other former company's. But it still happens and then you're seeing organic growth in the growth from business they have. Slowing down -- becoming all negatives again is ruled adult schools let the dozens and the -- -- discovers drugs and spends a billion dollars a year I think and right and get a valiant as saying oh we could slash that it took 80% of getting -- 200 million. The and and they say well that's enough to you know do all the -- -- we need to -- -- and develop some late stage drugs and continue developing receivers that. The problem is that's probably not true because elegance thanks. About 200 million dollars here just with mandated studies by the FDA and U. So they had to be done yet it's already -- this it's not a new recession though it's just to prove that the drugs are safe and there's no other problems with it. So you'd have limiting let that happen in sales exactly. Hard to see if they say okay we're gonna continue developing these drugs mini camera that has -- That's one question again so -- he would get some -- -- in any deal. That was another little wrinkle adamant -- to and you you can put it out for that the big about it gets this is a huge deal that the -- get this more often it'll have to do deals in the future -- he's an -- time. Used to be it would buy you know company for 500 million and then suddenly their sales went up at 50% from right here and now they -- arguing company wouldn't do anything that are going to be very small. That's where they're getting bigger and bigger. And the chief exec to make sure Stephen kind acknowledges apparently in two on investors and and analysts he said recently said that. Well we get to be -- break up and then we'll be able to -- and if -- company is built upon you know its growth is by acquiring other companies how does it actually make money by bicycling into an -- make that transition. Yeah this is something that Tyco did which is kind of alarming -- political part lots of companies and then and then split in in three companies and that didn't work out very well for investors. So there's there's questions around -- tightly to that thanks rob what level breaking views each month.